Discussion:Insolvant S-Corp -- dissolve or keep for 10 years for possible tax benefit?

The S-Corp then tanked quite hard, and is largely not operating at this point. It has about $2,000 in assets to its $300,000 in liabilities.

I was going to dissolve the S-Corp within the next few months. I was always a material participant, so there is no issue of passive income or losses.

I have a cumulative amount of disallowed/suspended losses on my 2003-2007 Form 6198's, of about an amount of $275,000. These losses were disallowed/suspended due to zero adjusted basis and no contributions.

Under advice from an IRS Individual Complex Tax Law Department representative, I thought when I dissolved the S-Corp, those losses would become current/unsuspended, create a huge loss on my Schedule E, creating a huge net operating loss which would carry forward for up to 20 years to offset future earned income.

In the thread Discussion:Where are unsuspended 6198 losses declared, when stock interest is terminated?, Dennis indicated that the IRS agent was incorrect, and that without somehow restoring basis, the disallowed/suspended losses just went away.

I am filing personal Chapter 7 bankruptcy to discharge the S-Corp debt that I personally guaranteed.

That background leads me to my question...

Should I dissolve the S-Corp?

Or, should I leave it open and completely unoperating? What if I do this, and wait for the statute of limitations to run out on all the S-Corp debts (about 10 years because of judgments?) Would I then be able to have the S-Corp earn income up to the disallowed/suspended loss amount without paying income tax on the pass-through income? If this works, retained profits and distributions I might make in the future might not be income taxed.

Of the $300,000 in liabilities of the S-Corp, about $50,000 of that is from tax liabilities including penalty and interest. Maybe keeping the S-Corp open would be more trouble with taxing authorities than it's worth.

There may be an issue of cancellation of debt income. If none of the creditors issue a 1099-C, and the statute of limitations runs out, does that need to be reported as cancellation of debt income, even if the creditors never indicate to him that the debt is considered cancelled?

I wasn't sure you were coming back. Now that you have. Here you go:

I looked at the bankruptcy forum. I saw your posts there. I really don't know what to believe about your situation or your profile on this forum. It's a real whopper of a story that's for sure. The reason:

Seems you like online poker. You mention it in your posts on the bankruptcy forum. You even acknowledged that your wife won $50K on a hand and you were hoping to keep that money out of the bankruptcy. I guess the royal flush pays nicely in that situation. So you were hoping after taxes to give that money to your dad through your wife. You changed all your online poker accounts to your wife, according to what I read.

You also hoped to avoid the trust fund penalties on the employer payroll taxes. You were looking for a way out of that. You were also hoping to avoid paying your bankruptcy attorney by having it discharged in bankruptcy.

Now some advice that's practical, honest and truthful: Take that online poker money you won and put some of it towards some of it towards professional tax advice and your bankruptcy lawyer. You are in over your head like with your S Corp. Get a professional and get out of here. Now.

Tom

Tom

Darlingm - PLEASE DON'T BRING ANOTHER CHILD INTO THE WORLD!! We have enough already that are being "grown" (notice I didn't say "raised") by parents with "issues". Quit gambling and get smart enough to not get snookered by an "international credit card fraud ring". Get a job and put your efforts into that instead of trying to figure out how to get rich quick or cheat your bankruptcy attorney out of what he has earned. (Trust me - he's smart enough not to get shorted by you.)

It appears my membership is about to come to a close.

I'll likely be banned by a moderator by the end of the day, if this site does that, but I can only hope the moderator slaps "Bottom Line" as well. Although part of me might miss being a member on this website, almost all replies have been rude, condesending, and completely unhelpful.

Taocpa, I respect your skeptisism. I really do. But, if you look at my bkforum.com post about the bankruptcy attorney, I never had the intent to not pay my attorney. I was curious how bankruptcy attorneys protected themselves from having this happen, and someone answered me that bankruptcy attorneys get payment first. My attorney and I, long ago, actually setup a deal where I'm writing custom software for him instead of paying him. So, I would have had no opportunity to try screwing him, nor would I. I like being able to sleep at night, and screwing over someone helping me when I need it so much would not be something I would do. Everything I have said is true, unfortunately it's what I've been going through. You never took me up on it in earlier posts, but I even offered to show documentation backing up anything I've said.

I've never gone off or swore at someone on a forum before. But, this really needs to be said.

"Bottom Line", you really crossed the line. The rest of you, I can respect your skepticism! "Bottom Line",.

Seriously you little ("Bottom Line"), you don't have a clue what you're talking about. Before you go off like that read and understand what someone is saying before you go and make an for yourself.

The gambling you are talking about started off with $0.01/$0.02 Texas Hold'Em Poker with a total balance of about $50. $50 is recreational, and is an entertainment expense, when $50 stretches out for many months of play. $50 isn't going to make or break a person or family. The jackpot that awarded $50,000 was a jackpot award because her four Jacks was beaten by a Royal Flush. Although there was only about $1.50 at stake on the hand, it triggered a jackpot situation and gave the large reward. We've never gambled with anything more than pocket change.

If you read about the "international credit card fraud ring" it's much more complicated than the standard situation you hear much about on the news. I wasn't one of the idiots who responded to the emails like "i have monies $50,000,000 and want to give it to you but i need first $100.000 from you". What happened is that I ran an eCommerce website that accepted credit cards. Since day one, we would only ship orders to an address approved by the credit card company. If a customer wanted to ship to his work address, his credit card company had to OK it, or we would not process the order. We knew we were liable if we accepted a fraudulent order. What we didn't plan on was Capital One believing the fraud ring was one of their legitimate customers -- who said they moved, waited for their credit card billing address to be changed, and place an order with us a few months later. We didn't plan on Capital One (over the phone even, not just electronically) saying the address was proper and ship the order, and taking the money back months later when Capital One learned they had been duped.

Get smart enough to not get snookered by this fraud ring? The documentation we got from Capital One on the credit card account showed that they hit NewEgg and Amazon as well, so I guess no one in the eCommerce businessis smart enough, eh?

How the hell are eCommerce merchants supposed to protect themselves against fraud, when it's the credit card company's lax security policies that allow merchants verifying orders get defrauded?

"Bottom Line", how dare you say something about not having a child.

I'm really in a low and hard situation in my life. I started this business when I was 16, and now realize I made a lot of mistakes.

But in my opinion, everyone is entitled to try to get out of the bottom of the barrel and go for a slightly better life, within the law.

And in my opinion, "tax professionals" such as "Bottom Line" shouldn't be ridiculing someone that badly when someone is trying to fix their mistakes

I thought about it for a while, and decided speaking my mind against "Bottom Line"'s out of line comments was worth getting kicked off. I hope that doesn't happen, but if it does, I still feel what I said needed to be said.

And like I said earlier, I might not have found posts by other members than "Bottom Line" the most friendly or thorough, but I can at least respect everyone including your and Taocpa's skepticism.

Just a reminder to the old and new!

TexCPA

The Code of Conduct certainly applies to me also, I know I violated the "Be polite" and "Be civil" provisions of the Code of Conduct, but I've never made a post like that or gotten into "flaming" whatsoever in my thousands of forums posts on many forums ranging on many subjects.

I hope the regulars on this board who treated me rudely and personally attacked me re-read the Code of Conduct and reconsider their actions, especially the portion of Don't Bite the Newcomers.

Fair enough.

But, in defense of the situation, this young man needs professional tax advice beyond the scope of this forum and as you can see from some research, is finding ways to enrich himself at the expense of his bankruptcy by shifting assets to his wife. He is in over his head and needs to use the resources he won from the poker winnings to pay for professional advice.

Besides, he got an answer to his original question and now he's back for more. He's almost turning into "BeatleFred".

Then he insulted BottomLine.

I realize that maybe I came off harsh, but it was more sarcastic than anything else, born out of frustration that Darlingm reminded me of another poster who attacked us last week who posted a homework question in the Accounting Forum. Most of the time we joke with them, but we tell them politely to go away and refer them to another site, but this guy was rude, nasty and I fought back. Maybe not a great idea in hindsight, but Darlingm's writing style was similar to this person.

Now Darlingm:

I don't want your documentation, because I know that it will only lead to more questions than answers. FYI, I spent 20+ years as a Controller and CFO. I re-read your profile. Here's a quote: "approximately $5 million in revenue annually, however the cost of goods sold and expenses were always slightly below or above its revenue." In reading that, I can tell you were always treading water. That "scam" didn't put you out of business. You were always on the verge of it. I've seen it before because I've worked at outfits like yours and for owners who wouldn't listen to practical advice from me as a professional. Also, you claimed to be an eCommerce business. That in and of itself tells me more about your business model. Eventually they became known as "dot bombs." Another thing: you said in your profile, "I am not a CPA, but have been acting as a CPA for my S-Corp for 8 years." Young man, some sage advice from someone almost 20 years older; you are not a CPA, don't act like one. You should have hired one in the first place. That's why you are in the mess you are in now.

I know full well how Texas Hold 'Em is played. I was playing it long before you were. And I've played online. $50 doesn't last that long. I also played blackjack (never online) at casinos. I am strictly recreational, but I do know my limits, but I also know the thrill of the chase. Yet I've never lost money. I'm maybe overall $500 ahead.

As far as protecting yourself, it's called insurance.

Also, I noticed you practically were bragging on the Bankruptcy Forum about getting out from underneath employer withholding taxes and the trust fund penalty. And now here you are pouring your heart out looking for sympathy, free advice? You don't appear to be trying to fix your mistakes. It's just me, but I see you trying to circumvent the law, not be within it. You were also ticked at the banks for their overdraft fees and a garnishment.

And then you go after Bottom Line? A well-respected forum member? Big mistake. She's good people.

Again, I urge you to take the money you won from the poker hand, pay for professional tax advice and get on with your life. You are in over your head. You didn't know what your were doing with your business, you don't know what you are doing with the tax return. This is not child's play.

Another thing, I had my daughter when I was 39.

This is my last response. I am not going to debate you anymore, call for your being banned or anything. I want you to truly understand that I do feel for you. You've made mistakes. It happens to the best of us. I've made them and I will make plenty more in my life. But you need to learn from this that if you are going to run your own business, go back to school, finish your education, get your degree, get a job and get some experience before you do this again. That is the best you can do for yourself and your wife and any children you decide you want to bring into this world. Become stable first and then shoot for the stars. You are still young enough. There is nothing wrong with saying you aren't the smartest guy in the room yet. Maybe some day you will be. But right now, swallow your pride, hire a professional and move on with your life so you, your wife and eventually your children can have a healthy, happy wonderful life.

Best of luck,

Tom